What You Should Do With Your Gas Bill

I was recently approached by a friend the other day to help him analyze a few different gas options that his business had been provided with.  While Peace Power does not retail gas at the present time, I have educated myself on the market given the number of times I have been asked for my opinion. 

 

This particular friend has numerous business locations, most of which are signed up with a specific competitive rate gas retailer.  You could say that they have an existing relationship and would hope that my friend would rely on this retailer for a fair market rate.  However, I was shocked upon analyzing the fixed-rate offering this retailer provided my friend for his latest location.  The rate quoted was $5.88/GJ fixed for four years.  When questioned why the rate was so high, the retailer’s sales representative responded with, “The regulated gas rate is at $9.388/GJ this month in Calgary.  It used to be $3/GJ, but it has been consistently rising.”

Below are three graphs of the forward market for gas taken from the AECO website (Alberta’s natural gas spot-trading index), which shows that although prices are high at present, over the coming years, they should remain soft.

 

As can be seen, a rate offering of $5.88/GJ is ridiculous and factors in a very healthy profit margin for the retailer.  Alternatively, my friend can choose to go on the regulated rate for gas which averaged $3.152/GJ in 2013.  Further, if you average the forward market regulated rate over the same four years that the $5.88/GJ rate was offered to my friend, it averages at $4.10/GJ – that’s a 30% difference!

 

It never ceases to amaze me how retailers come out of the woodwork when there is volatility in the market and prey on the uninformed.  They use doom and gloom tactics to scare people into signing ridiculous contracts that only benefit themselves, the retailer.

 

However, armed with this information, you can prevent yourself from getting trapped into a garbage contract by the following company that comes knocking on your door.  Further, if you are currently on a fixed rate for gas, I would look at what you are paying and seriously consider canceling the contract (subject to a possible cancelation fee) and switching back to the regulated rate.

 

Note that the regulated electricity and gas markets are structured differently in Alberta.  The regulated rate for gas is flow-through, meaning the consumer pays the actual cost of gas with no retailer mark-up for profit.  The regulated rate for electricity is different, and mark-up for profit is allowed by the regulated provider.  This is the reason why Peace Power’s current rates are 22% cheaper for commercial and 20% cheaper for residential when compared to the average respective regulated electricity rates over the past three years.  We operate more efficiently and are content with a smaller profit margin.

 

Note that our current rates on offer have been extended through to May 31, 2014, all rates are good until the end of 2016:

If you are one of our existing customers and like the service you are receiving, tell your friends and family about us and have them sign up today.

 

Have a great spring!

Cheers / Chad

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